If everything you know about investing comes from viewing “The Big Short” or “Wall Street,” wading into the stock market might seem incredibly daunting. Hollywood portrayals of conniving millionaires are responsible for a lot of misconceptions around investing. Investing isn’t only for sharks in high-priced suits or financial wunderkinds—it’s a good option for anyone who wants to grow their money. So if any of these common misconceptions are keeping you from building a retirement nest egg, it’s time to rethink everything you think you know.
Myth: It’s Only for the Wealthy
Investing is for anyone. Too many people fear that, because they’re on a tight budget or just starting their careers, they’ll be laughed out of an investment advisor’s office. In fact, plenty of people start out with an initial investment of $1,000 or less. Starting early gives investors maximum time for their money to grow, so don’t wait to hit a certain financial benchmark before making your first moves.
Myth: Taking Big Risks is the Only Way to Make Money
Even people who aren’t familiar with investing have internalized the myth that big risks equal big rewards. And sure, sometimes the market bears this out, like when investors take chances on companies in developing industries and they explode overnight. The problem with the “big risk, big reward” saying is that it implies that the only way to really grow your investments is to take big, dramatic swings, and maybe risk losing everything. This isn’t true. There are plenty of relatively low-risk investment options that deliver returns without requiring new investors to take major leaps of faith.
Myth: You Have to Understand the Stock Market
Do you know the difference between blue chip stocks and pink sheet stocks? It doesn’t matter either way: There’s no stock market quiz that you have to pass before you can start investing. Novices might be cautious about jumping in because they assume that all investors are experts on all the workings and terminology of the stock market. Remember, investing can be a personal process that’s between you and your financial advisor. No one will ask you to demonstrate your stock market expertise. As long as you feel comfortable with how you’re investing your money, that’s all that matters.
Plus, keep in mind that there are plenty of investment options that don’t involve the stock market at all. Investing in bonds or real estate allows you to sidestep the market altogether.
Myth: You Have to Watch Investments Like a Hawk
Sure, there are investors who check their portfolios multiple times a day and are constantly thinking about what changes to make. This level of oversight is about personal preference. You don’t have to review your investments every day or even every quarter if you don’t want to. Don’t avoid investing because you’re afraid it’s a huge time commitment, or that you’ll have to become obsessed with watching your portfolio.
Myth: Investing is a Crapshoot
This is one of those misconceptions that really scares people away from investing. They assume that investing is just another form of gambling, and that whether an investor doubles their money or loses everything is largely about luck. If you’re wary of gambling for any reason, then it’s natural that investing might make you nervous. You have a lot more control over how much risk you take when choosing investments than you do in a casino. Remember that investing is about the long game. There may be losses along the way, but investing carefully may be worth the risk if it means you stand a better chance of having enough money to comfortably retire.
Myth: Anyone Can Do It From Their Phone
This is one of those misconceptions that isn’t technically inaccurate, but there’s a caveat. The Internet has made investing so accessible that even novices can figure out how to buy stocks through online brokers. But there’s a difference between “investing” and “investing strategically.” Some people who take a DIY approach to investing will get lucky and earn impressive returns, but others will make random picks that backfire.
Making your first investments is a much more comfortable experience when you have an experienced advisor by your side to explain all the options and make recommendations that make sense for your goals and risk threshold. Learning to invest is like learning any new skill—except with this skill, your retirement savings are on the line. It’s too risky to attempt without the input of a professional advisor.The advisors at Sachetta Callahan will meet you where you are, whether you’re brand new at investing or want to move your investment strategy to the next level. Contact Sachetta to get started!